Until now there has been a lot of confusion about how holiday is to be treated, and how it is applied to furlough leave.
As the situation is now clearer, we wanted to share some of the guiding principles:
Furloughed workers will accrue statutory holiday entitlement of 5.6 weeks per year, and any further additional holiday provided under the terms of their employment contract.
Workers on furlough can take holiday without disrupting the furlough period.
Employers can require furloughed workers to take holiday at a specified time, providing they give the requisite notice in accordance with the Working Time Regulations. In essence this means an employer must give twice the amount of notice to the employee of the time they wish them to use; for example, if you want an employee to take one week off using their holiday entitlement, you need to give them two weeks’ notice of the requirement to do this.
In view of the wording in the guidance, it is worth employers considering, when requiring individuals to take holiday, whether anything in their particular situation, during the pandemic, means they are prevented from resting, relaxing and enjoying leisure time. Employers will need to be willing to consider any such restrictions.
It looks from the guidance that workers on furlough are unlikely to need to carry forward statutory annual leave, as they can take it during the furlough period, provided that the employer has notified the employee in advance that they must use their holiday entitlement during the furlough period.
Holiday pay for furloughed workers should be calculated based on usual earnings of the worker, i.e. 100 percent of their usual pay. So, the employer is topping up the 20% beyond the 80% covered by the furlough scheme.
If a furloughed worker would normally have had a bank holiday as annual leave, there are two options – if the worker and employer agree that the bank holiday can be taken as annual leave whilst on furlough, the employer must correct the holiday pay. If the worker and employer agree the bank holiday will not be taken as annual leave, the worker must still receive the day of annual leave within their entitlement, which can be deferred until a later date – but the worker should still receive full holiday entitlement.
There is additional guidance on when it will not be reasonably practicable for workers not to take holiday. Employers should consider factors like:
Increase in demand in the business that requires workers to continue working.
The extent to which the workforce is disrupted by CV19 and what options are available to provide temporary cover.
The health of the worker and whether they need to take a rest and relaxation period.
Whether there is time left in the worker’s year of leave to allow them to take a holiday at a later date but in the same year.
The extent to which taking leave would impact on society’s overall response to CV19.
The ability of the rest of the workforce to provide cover.
It is advisable to enable workers to take as much of their leave as possible in the year to which it relates - if an employer is unable to refund the difference between the furlough pay and the 100%, then it is likely that annual leave could not be permitted.
Leave that is carried forward is subject to the usual rules of the employer and there is no payment in lieu in line with normal HMRC regulations. Untaken accrued paid leave entitlement can only be paid up on termination of employment.
Understanding all the various nuances of this can be complex and so we urge our clients to contact us and discuss any specific questions they have.
